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Pittsburgh Pennsylvania Business Litigation Law Blog

On behalf of Picadio Sneath Miller & Norton, P.C. posted in Business Litigation on Wednesday, December 20, 2017.

Approximately two years ago, I commented on the Superior Court opinion in Gongloff Contracting, L.L.C. v. L. Robert Kimball & Assoc., No. 785 WDA 2014 (Pa. Super. 2015), which expanded the reach of Pennsylvania's negligent misrepresentation law from applying only to claims by contractors against design professionals to also encompassing claims by subcontractors against design professionals. Recently, the Superior Court has further expanded this cause of action beyond claims against only design professionals. In Fulton Bank, N.A. v. Sandquist, No. 2306 EDA 2016 (Pa. Super. 2017), the Superior Court has now recognized a cause of action for potential liability against accountants and their firms under a theory of negligent misrepresentation for providing professional information that is designed to be relied upon by a third party.

Strict product liability generally focuses on the product itself, not the negligent conduct of the defendant, and as a result, defendants often are precluded from relying on certain negligence concepts in defending strict liability actions. A plaintiff's comparative fault or contributory negligence, for example, generally may not be used to excuse a product's defects or reduce a defendant's fault. A recent decision from the U.S. District Court for the Middle District of Pennsylvania makes clear, however, that evidence of a plaintiff's negligent conduct may be admissible in a strict product liability case under limited circumstances. Dodson v. Beijing Capital Tire Co., 2017 U.S. Dist. LEXIS 158484, at *8-13 (M.D. Pa. Sep. 27, 2017). Because such evidence can be powerful in defending these types of actions, it is important to understand when and why it may be admissible.

Short Answer: Yes, but as with all non-compete provisions, proceed with caution and draft wisely.

Like many states, Pennsylvania has long viewed restrictive covenants such as covenants not to compete with disfavor. Despite its preference against them, non-compete agreements are still frequently used and upheld when narrowly drafted.

In Pennsylvania, in order to be enforceable, a restrictive covenant must satisfy three general requirements:

(1) the covenant must relate to either a contract for the sale of goodwill or other subject property or to a contract for employment;

(2) the covenant must be supported by adequate consideration; and

(3) the application of the covenant must be reasonably limited in both time and territory.

In the recent case of Kurach v. Truck Ins. Exchange(C.P. Philadelphia 2017), a Pennsylvania Court held that under Pennsylvania law, insurance companies are required to include general contractor overhead and profits in actual cash value payments for losses where repairs would be reasonably likely to require a general contractor.

In this case, the homeowners sustained water damage to their homes. Both homeowners had purchased a higher cost insurance policy that provided that in the event of damage, they would receive "replacement cost", a higher amount than the lesser insurance product which only provides for "actual cash value". The policy provided a two step process whereby the homeowner would receive "actual cash value" upon getting an estimate for the repairs, and then upon completion of repairs would receive the difference between "actual cash value" and "replacement costs". The policy defined "actual cash value" as replacement cost less depreciation. The insurance carrier agreed that repairs would require the involvement of a general contractor. However, the homeowners never actually went to step two of the policy to complete the repairs, and therefore never sought "replacement cost". Rather they asserted that they were entitled to an "actual cash value" which included contractor overhead and profit, even though, by not completing the work, no such overhear or profit were ever incurred.

To prevail on a strict product liability claim under Pennsylvania law, a plaintiff must prove the product at issue is defective, the defect existed when the product left defendant's hands, and the defect caused the harm. A product may be defective based on a manufacturing or design defect, or based on a failure to warn. Regardless of the theory, a plaintiff must satisfy one of two standards (or both) to show a product is defective: (i) a consumer expectations standard; and/or (ii) a risk-utility standard. In the wake of Tincher v. Omega Flex, Inc., 104 A.3d 328 (Pa. 2014), Pennsylvania courts continue to define the contours of these standards, and a recent decision from the Western District of Pennsylvania, Igwe v. Skaggs, 2017 U.S. Dist. LEXIS 99622 (W.D. Pa. Jun. 28, 2017), adds clarity to the consumer expectations standard in particular.

In Igwe, the court granted summary judgment to a product defendant in a wrongful death matter where the plaintiff relied solely on the consumer expectations standard. Under this standard, a product "is in a defective condition if the danger is unknowable and unacceptable to the average or ordinary consumer." Tincher, 104 A.3d at 387. The Igwe decision contains a clear analysis of the standard and is an example of how Pennsylvania courts may find that there was no unknowable and unacceptable danger as a matter of law.

In a strict product liability claim, compliance with government regulations and industry standards can be powerful evidence for the defense. Such evidence traditionally has been inadmissible under Pennsylvania law based on the Pennsylvania Supreme Court's decision in Lewis v. Coffing Hoist Div., Duff-Norton Co., Inc., 528 A.2d 590 (Pa. 1987). The Court's decision in Tincher v. Omega Flex, 104 A.3d 328 (Pa. 2014), however, raises questions about the continued viability of Lewis and provides defendants with a compelling argument that this type of evidence should be admissible. Nevertheless, Pennsylvania courts have been slow to reach that conclusion, and recent Superior Court decisions cast doubt on the admissibility of such evidence, which at best remains an open issue.

The Pennsylvania Superior Court recently affirmed an order of the Court of Common Pleas of Philadelphia County entering a judgment against American Honda Motor Co., Inc. ("Honda") on a jury verdict of $55,325,714 in a personal injury action. American Honda Motor Co., Inc. v. Martinez, 2017 Pa. Super. LEXIS 271 (Pa. Super. Apr. 19, 2017). Plaintiff in Martinez suffered severe injuries in an automobile accident allegedly as a result of (i) a defectively designed seatbelt and (ii) a failure to warn with respect to the subject car's inability to protect passengers in certain types of accidents. In addition to providing a helpful analysis of design-defect claims after Tincher v. Omega Flex, 104 A.3d 328 (Pa. 2014), the Martinez decision provides guidance as to how Pennsylvania courts analyze causation in a failure-to-warn claim.

The element of causation in a failure-to-warn claim requires plaintiff to prove that had an adequate warning been given, plaintiff would have followed it. See, e.g., Dolby v. Ziegler Tire & Supply Co., 2017 Pa. Super. Unpub. LEXIS 791 (Pa. Super. Feb. 28, 2017). In Martinez, Honda argued on appeal that the trial court erred by instructing jurors that they must presume plaintiff would have followed an adequate warning. The Superior Court affirmed the instruction, noting that the trial court did not apply the presumption "in a vacuum." Critically, plaintiff presented testimony at trial, over Honda's objection, that had there been a warning about the car's inability to protect him in a rollover, he would not have purchased the car. Moreover, Honda did not rebut plaintiff's testimony on this issue. The Superior Court held that in the absence of rebuttal evidence, the heeding instruction was appropriate.

Recently, in the case of CPG Int'l LLC v. Shelter Products, Inc., No. 3:15cv1045 (M.D. Pa. 2017) the United States District Court for the Middle District of Pennsylvania denied a motion for partial summary judgment on the grounds that the claim at issue was not barred by the statute of frauds, which applies to contracts for the sale of goods, because the purchaser actually agreed to provide a service to the seller in repurchasing inventory and relocating it to another distributor.

A panel of the Pennsylvania Commonwealth Court issued its opinion in Pa. Manufacturers' Ass'n Ins. Co. v. Johnson Matthey, 2017 Pa. Commw. LEXIS 115 (Pa. Commw. April 21, 2017) adopting the multiple trigger of J.H. France to claims of property damage caused by continuing pollution. The Commonwealth Court is one of Pennsylvania's two mid-level appellate courts and is primarily responsible for matters involving state and local governments and regulatory agencies. It also acts as a trial court when lawsuits are filed by or against the Commonwealth. It does not have significant experience with insurance coverage cases. This case was brought before the Commonwealth Court by Pa. Manufacturers' on a petition for review in its original jurisdiction seeking a declaration that it had no obligation to defend or indemnify JMI with respect to a suit filed by the Pennsylvania Department of Environmental Protection (DEP) in U.S. District Court for the costs of cleaning up contamination at a facility used to manufacture and process metal alloy tubes and associated equipment from 1969 to 1974. DEP was joined as a necessary party as required under Pennsylvania's declaratory judgment statute.

DEP's complaint alleged that as a result of those operations, hazardous substances including trichloroethylene, were disposed in the environment and that subsurface migration of contaminated groundwater from the site contaminated an aquifer beneath the site and offsite properties. At issue were two commercial general liability policies Pa Manufacturers' issued in 1969 and 1970 (the policies covering the period from April 1, 1971 to April 1, 1979 were exhausted). Based upon the Pennsylvania Supreme Court's Pa. Nat'l Mut. Cas. Ins. Co. v. St. John decision, Pa. Manufacturers' argued that only those policies in effect when the contamination, i.e. property damage, manifested would be triggered. Pa. Manufacturers' sought summary relief.

April is National Safe Digging Month, reminding all contractors and homeowners to call 811 at least three business days before starting a digging project to ensure that all underground utility lines are properly marked and precautions are taken to ensure safety and damage prevention. Whether you are in Pennsylvania or another state, 811 is the nationally recognized number for reporting your planned digging project. According to Pennsylvania 811, "every six minutes an underground utility line is damaged because someone decided to dig without first dialing 8-1-1." Hitting a single utility line can cause severe bodily injury as well as repair costs and power outages. So whether you're planning to simply install a new fence or you're about to begin a major public construction project, Call Before You Dig!

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Firm shareholder Henry Sneath's article "The New Federal Defend Trade Secrets Act of 2016" was published in the 2016 Fall/Winter edition of USLAW Magazine.

Firm shareholder Henry Sneath's ed a CLE on the New Federal Defend Trade Secrets Act of 2016 for the Western Pennsylvania chapter of the Association of Corporate Counsel

Firm shareholder Alan Miller was named as the 2017 Best Lawyer Environmental Litigator of the Year and also was named a 2016 Super Lawyer in Insurance Coverage.

Firm shareholder Henry Sneath was named a 2016 Super Lawyer in Intellectual Property Litigation; firm shareholder Anthony Picadio was named a 2016 Super Lawyer in Business Litigation; firm associate Brandon McCullough was named a 2016 Super Lawyer Rising Star in Insurance Coverage.

On May 25, 2016, Firm shareholder Jeff Ludwikowski presented "Voir Dire and Jury Selection" with Honorable Ronald Folina, at the Crowne Plaza Pittsburgh, as part of the National Business Institute's Continuing Education Programs.

Firm shareholder Henry Sneath and firm associate led and presented at a 2-hour CLE on "Defend Trade Secrets Act (DTSA): The New Federal Private Cause of Action for Trade Secret Misappropriation."

Firm shareholder Kelly Williams spoke at the USLAW Business to Business Litigation Exchange in San Francisco on Prosecuting and Defending Business Defamation and Commercial Disparagement Claims by or Against Competitors Including Social Media Issues.

Firm shareholder Jeff Ludwikowski spoke on "Wacky Pennsylvania Construction Laws" at the U.S. Law Network Spring Conference in Rancho Palos Verdes California, which took place on April 7-9, 2016.

Firm shareholder Jeff Ludwikowski was selected to serve a two year term as Education Coordinator for the Construction Law Section of the U.S. Law Network.

Firm shareholder Bridget Gillespie and firm associate Brandon McCullough served as Regional Editors and Co-Authors of the Pennsylvania Chapter of the DRI Duty to Defend Compendium which was published in February 2016.

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Picadio Sneath Miller & Norton, P.C., is a Pittsburgh law firm that serves clients primarily in Pennsylvania, but also in other jurisdictions on a special admission basis.